Key Moments
- Federal Reserve delivers a 25 basis point rate cut to 3.50-3.75%, but maintains a distinctly hawkish tone.
- Australian dollar weakens 0.6% against the U.S. dollar after employment falls by 21,000, with full-time jobs dropping sharply.
- Indian rupee softens back below 90 per dollar, with USD/INR up 0.6% at 90.3 and approaching the 90.5 record high.
Fed Decision Keeps Asian FX on Cautious Footing
Most Asian currencies moved in narrow ranges on Thursday as traders reassessed the Federal Reserve’s latest policy decision, which combined a widely expected rate cut with firm, hawkish messaging on the outlook.
The U.S. central bank trimmed its benchmark rate by 25 basis points, setting the federal funds target band at 3.50-3.75%. This was the third cut in the current easing cycle. The decision was not unanimous, with three officials dissenting – two favoring no change to policy and one advocating a more aggressive reduction.
Fed Chair Jerome Powell characterized the step as “insurance” in response to signs of a softening labor market, while emphasizing that future rate moves will not follow a preset course. He underscored that policymakers will remain focused on inflation risks and will proceed cautiously with any further adjustments.
Market commentary reflected the tightening bias within the Fed’s projections. “In terms of the dot plot of individual forecasts, the median prediction is just one further rate cut in 2026, just as was the case in the previous forecasts from September,” ING analysts noted. “Looking at the forecasts, there is clearly a hawkish tilt,” they added.
In currency markets, the U.S. Dollar Index eased 0.1% after having earlier slipped 0.4% following the Fed decision. U.S. Dollar Index Futures were also down 0.1% as of 04:32 GMT.
Regional Currency Moves
Against this backdrop, major Asian exchange rates showed limited directional conviction. The Japanese yen’s USD/JPY pair edged lower by 0.1%. The Singapore dollar weakened modestly, with USD/SGD up 0.1%. The South Korean won also lost ground, as USD/KRW advanced 0.3%.
In China, trading in both the onshore yuan and offshore yuan was subdued, with the USD/CNY and USD/CNH pairs described as largely unchanged.
| Currency Pair | Move | Direction |
|---|---|---|
| U.S. Dollar Index | -0.1% | Dollar slightly weaker |
| U.S. Dollar Index Futures | -0.1% | Dollar slightly weaker |
| USD/JPY | -0.1% | Yen slightly stronger |
| USD/SGD | +0.1% | Singapore dollar weaker |
| USD/KRW | +0.3% | South Korean won weaker |
| USD/CNY | Muted | Little changed |
| USD/CNH | Muted | Little changed |
Australian Dollar Hit by Surprise Labor Market Weakness
The Australian dollar underperformed its regional peers, diverging from the generally cautious but stable tone across Asia.
Data from the Australian Bureau of Statistics on Thursday showed that total employment fell by 21,000, with a pronounced decline in full-time roles. Despite this deterioration in job creation, the unemployment rate was unchanged at 4.3%.
The softer labor data complicates the Reserve Bank of Australia’s case for a near-term rate hike, even though inflation pressures have been described as persistent. Following the release, the AUD/USD pair dropped 0.6%.
Indian Rupee Nears Record Lows Again
The Indian rupee also remained under strain, slipping back toward its weakest levels on record as outflows intensified.
The currency moved below the 90 per dollar threshold, with the USD/INR pair last quoted 0.6% higher at 90.3 rupees. That puts the exchange rate close to last week’s record high of 90.5 rupees per dollar.
Analysts pointed to selling by foreign investors and elevated domestic demand for dollars as the main drivers behind the rupee’s renewed weakness.
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